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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: telecomguy who wrote (5403)	4/19/2000 11:35:00 AM
From: Mighty Mizzou	Read Replies (2) \| Respond to of 14638

I knew you'd be sweating bullets today. Keep spreading the word, maybe SOMEBODY will listen. Try the CSCO thread, they'll listen/buy anything. LOL!!!!!!!!!!!!!!!!!!

To: telecomguy who wrote (5403)	4/19/2000 10:25:00 PM
From: Stocker	Respond to of 14638

telecomguy, you sure you're not really Herb Greenberg????? Again from thestreet.com......... Why Lucent's 'Beat' Doesn't Impress the Shorts By Herb Greenberg Senior Columnist 4/19/00 5:24 PM ET Based on its stock today, which rose 3 1/2 today to close at 62 3/4, Wall Street loves Lucent's (LU:NYSE - news - boards) fiscal second-quarter financial performance. Not only did earnings beat analyst estimates by a penny, but revenue was well ahead of expectations. So, what's not to like? Plenty, according to short-sellers, who find the quality of Lucent's latest earnings leaves much to be desired. Specifically, while operating earnings rose $233 million, research and development, and selling, general and administrative expenses -- both discretionary areas -- fell by $151 million. Perhaps more troubling is that gross margins, which analysts had been expecting to be around 46%, actually fell to 42.1%. Gross margins -- gross profit divided by sales -- is an indicator of how well a company is being run. The higher the better, generally, and it should generally be higher than analyst expectations if revenue is higher than expectations. Lucent attributed the lower margins to higher costs of ramping up its high-growth optical networks business, which is a fine explanation. However, "It's just they didn't tell you anything about it until last night," says one longtime Lucent short-seller. "Here's a company that blows up [with an earnings warning in January] and supposedly goes out of its way to tell you what's going on. And then it comes out with another quarter that has nothing to do with what people had expected it to be. It leads me to say there must be more stuff going on here, and that they're managing the bottom line number and how they get there." The evidence of that, they believe, is the company's decision to cut sales, general and administrative expenses, and R&D. (The predecessor of Nortel (NT:NYSE - news - boards) did that a few years ago in order to meet numbers, and wound up paying the price with earnings misses down the road.) What's more, R&D is the lifeblood of a tech company. A Lucent spokesman says that while R&D fell, after subtracting out the part of Lucent that will be spun off later this year, the percentage of R&D to revenue is now 12.2%, which is more in line with the company's objective. Maybe so, but R&D isn't falling at Nortel, where it's about 13.5% of revs, or Cisco (CSCO:Nasdaq - news - boards), where it actually rose to 13.7% of sales from 13.1%. "How does a tech company reduce R&D spending?" asks one short. They just do it, and that's one reason the shorts are staying short. P.S.: On a positive note, Lucent said that days outstanding of receivables, which had been rising, actually fell by three days last quarter, as did inventory. But skeptics like Wasserstein Perella analyst Eric Buck won't believe the quality of those numbers until they see them for themselves in the 10-Q, which probably won't be filed for another month.